Legacy Community Health Services Wins Significant Victory in Texas

By | Published On: September 6, 2016

Feldesman Tucker Leifer Fidell LLP is pleased to announce a significant victory for Legacy Health Services in Texas on Friday, September 2, 2016, in the U.S. District Court for the Southern District of Texas.  Led by Managing Partner Ted Waters and Partner Matt Freedus, this second ruling (the first found that the State’s elimination of wrap-around was unlawful) found that Texas has violated the statutory PPS provisions (Sect. 1902(bb) of the Social Security Act) by failing to fully pay Legacy (an FQHC) for out-of-network services provided to Medicaid beneficiaries.  This decision, for the first time, articulates an interpretation of Section 1902(bb) that makes clear that a State must ensure that an FQHC is fully paid for Medicaid-covered services provided to Medicaid beneficiaries regardless of whether the FQHC is in- or out- of the network of a particular MCO.

The genesis of the Legacy lawsuit was the termination of Legacy’s provider contract with a large, Houston based managed care organization (MCO) called Texas Children’s Health Plan (TCHP).  After termination, many of Legacy’s Medicaid patients continued to present at Legacy sites even though they were still enrolled with TCHP.  Legacy, as required by the terms of its 330 grant, still saw those patients and attempted to bill TCHP for the services provided.  TCHP refused to pay for thousands of visits, finding that the visits did not either meet the criteria for out-of-network payment or did not have prior authorization.  Since none of the visits met these criteria, TCHP directly, and Texas indirectly, refused to pay for the services.  The Court found that since Legacy provided Medicaid-covered services to Medicaid patients (a fact that Texas never disputed), the payment obligations of Sect. 1902(bb) are triggered and Texas must ensure that Legacy is fully paid at its PPS rate for the provided services.

This decision reinforces the fundamental concept that utilizing MCOs is a decision of the State, to help the State managed its Medicaid program.  Such a decision does not and cannot amend or modify the 1902(bb) obligation of a State Medicaid program to pay an FQHC at least its PPS rate for providing Medicaid-covered services to Medicaid beneficiaries.  There are a number of federal court decisions is the past three years that make this point including the early decision in Legacy and the decision earlier this year in South Carolina concerning payment for dual eligible beneficiaries.  Texas can appeal this decision to the Fifth Circuit Court of Appeals.

If you have questions or need a consultation about this ruling, please contact the Health Care group at Feldesman Tucker Leifer Fidell LLP, www.ftlf.com or 202-466-8960.

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